If you want to know how to mine Bitcoin, you can take two different steps: Go through a cloud mining company, or buy and use purpose-built hardware. We’ll look at both options and why, though neither is cheap, cloud mining represents the safest investment for your money.
Remember, research is essential! As for buying Bitcoin or altcoins, you need to be aware that nothing in the world of cryptocurrencies is guaranteed. Any investment could be lost, so make sure you do your reading before pulling out your credit card and have a secure Bitcoin wallet standing by. As with all of our cryptocurrency coverage here on Digital Trends, this should not be considered financial advice.
Mining vs. investment
When Bitcoin launched in 2009, mining the world’s first and premier cryptocurrency needed little more than a home PC — and not even a fast one at that. Today, the entry barrier is far higher if you want to make any profit doing it. That doesn’t mean it’s impossible, but it’s not the homebrew industry it once was.
Before we discuss how to mine Bitcoins yourself, it’s important to note that although there is uncertainty in everything cryptocurrency-related, mining is arguably the most volatile. Hardware price fluctuations, Bitcoin-mining difficulty changes, and even the lack of a guarantee of a payout at the end of all your hard work make it a riskier investment than even buying Bitcoins directly.
Because of this and general market volatility, it can be challenging to know how much profit you will make from mining. 2018 saw the mining market plummet in profit and shoot up when it comes to entry barriers. Unless there’s a significant Bitcoin tech change, this is likely to stay the same. A single Bitcoin is valued at around $50,000 at present, but mining can come with high costs.
In the end, buying Bitcoin directly at least gives you something for your money immediately. It’s certainly worth considering before you go down the mining route.
Step 1: Pick your mining company
Cloud mining is the practice of renting mining hardware (or a portion of their hashing power) and having someone else do the mining for you. You are typically ‘paid’ for your investment with Bitcoin, even if the hardware isn’t used for mining Bitcoin. As with general investing, it’s essential to do your research — there are many companies out there that purport to be the best, and even the largest have their detractors.
Several cloud mining companies have come and gone over the years, including ones we’ve spoken to and validated directly, like HashFlare, which told Digital Trends in an interview that every one of its customers has turned a profit using its service. In early 2021, you’re far better off going with a company like Coinbase, an established and respected cloud mining entity. It’s expensive to get started but one of the best options out there.
For a broader range of options, CryptoCompare maintains a list of mining companies with user reviews and ratings, though be aware there are a lot of reviewers looking to shill their referral codes in the comment section.
Step 2: Choose a mining package
Once you have picked a cloud mining provider and signed up, you need to pick a mining package. That will typically involve choosing a certain amount of hashing power and cross-referencing that with how much you can afford to pay. Usually, paying more will give you a better return, or you will turn a profit quicker, but that’s not always the case.
Most cloud mining companies will help you decide by giving you a calculation based on the current market value of Bitcoin, the difficulty of Bitcoin mining, and cross-referencing that with the hashing power you’re renting. However, it’s important to note that those numbers can and do change, so it is vital to look at market trends and estimate where Bitcoin may be going before choosing your contract. What may be profitable now may not be if Bitcoin’s value crashes.
As much as companies like Coinbase offer their calculators too, we’d suggest using a third-party alternative to alleviate the potential for any bias that might sneak into the calculation.
Some cloud mining companies will sell you a contract on a pre-sale basis — effectively asking you to pay upfront for an agreement that won’t begin for weeks or months when new hardware becomes available. In most circumstances, that is not advisable because there is no way to guarantee those contracts will be profitable when they start and not even a concrete indication of when that will happen.
Step 3: Pick a mining pool
After choosing your contract, most cloud mining companies will ask you to pick a mining pool. That’s where you select a global mining team to join.
It’s a method of increasing the chance of earning Bitcoin through mining, and it’s a standard practice in the cloud and personal mining. There are pros and cons of different pools that go beyond the scope of this article, but joining an established and proven pool with low fees is likely to be your best bet.
One of the most popular and dependable pools for new miners is Slush Pool, but you should always do your research. Like companies, many pools aren’t trustworthy.
Step 4: Select a wallet
Once you’ve completed that step, your cloud mining can begin, and within a few days or weeks, you should start to see your cloud mining account start to fill with Bitcoin. Withdrawing it and putting it into a secure wallet of your own is a good plan as soon as you have a small Bitcoin holding, though some cloud miners will allow you to reinvest your earnings for higher hashing power.
Whatever you do, though, you need to decide what you’re going to do with your bitcoins in the long term. While you can purchase many products and services with bitcoins, prices can fluctuate, and you may have to do even more research to see if you’re getting a good deal. We can also help you trade your bitcoin for a different cryptocurrency or sell it directly for cash.
“HODLing,” that is, holding your Bitcoin for dear life, is also a viable strategy for some people. HODLer’s are those who hold onto their Bitcoin because they believe that their value will go up over time. Unfortunately, there is no truly reliable way to predict future values for Bitcoin, though.
Of course, we aren’t financial advisors and wouldn’t suggest you do anything in particular with your Bitcoin. If you decide you want to hold onto your Bitcoin, you should consider a secure, potentially even hardware-based, wallet to store it in.
What if I want to mine with my hardware?
Before you spend money on any hardware or mining setups though, you should use a Bitcoin mining calculator to go over the process’s costs. You can then decide if it is even possible for you to make a profit with all the costs considered. Keep in mind that prices can fluctuate, too, and power costs can vary widely. Bitcoin mining is exorbitantly expensive for most average folks, and there’s a slim chance you’ll be able to make enough bank by running your operation.
Due to how expensive it is to set up the proper system, we only recommend mining Bitcoin yourself if you have ready access to plentiful and, crucially, cheap electricity. You’ll also need a powerful network connection. Hardware-wise, nothing but the very latest generation ASIC miners have even a hope of making a profit from Bitcoin mining, so for direct Bitcoin mining, check out the AsicMinerValue site to see what you need.
One alternative to direct Bitcoin mining is using a service like NiceHash to develop your own method. NiceHash lets users connect their ASIC machines or GPU/CPU and rent them out for use in alt-currency mining, with all profits sent to you in the form of Bitcoin. It’s worth checking out the profitability calculator before starting, however, as you’ll need to factor in the relative power of your hardware and your local electricity cost to potentially make a profit.